Question: Can you help with this? Based on past experience, Maas Corp. {a U.S.based company} expects to purchase raw materials from a foreign supplier at a

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Based on past experience, Maas Corp. {a U.S.based company} expects to purchase raw materials from a foreign supplier at a cost of 1,100,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,100,000 francs in three months. Maas selects a strike price of $0.81 per franc when the spot rate is $0.81 and pays a premium of $0.002 per franc. The spot rate increases to $0.81? at December 31, 2020, causing the fair value of the option to increase to $9,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.83, resulting in a fair value for the option of $22,000. The raw materials are used in assembling nished products, which are sold by December 31, 2021, when Maas prepares its annual nancial statements. \f\f

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